Slovak Republic remains strong, but it needs to become more inclusive, says OECD

The Slovak Republic recovered strongly from the global economic crisis and is weathering well the storm that has struck its main European trading partners. The challenges going forward will be restoring public finances while driving down unemployment and fostering long-term inclusive growth, according to the OECD’s latest Economic Survey of the Slovak Republic.

The report, presented in Bratislava by OECD Secretary-General Angel Gurría and Slovak Prime Minister Robert Fico, recognises the strong performance of the Slovak economy over the past several years. Nevertheless, it also notes that weak domestic demand and the difficult external environment have reduced the forecast for the coming years, with growth projected at 2% in 2013 and 3.4% in 2014.

“The Slovak Republic has one of the highest growth rates in the OECD and is seen as an attractive environment for foreign investment,” Mr. Gurría said during the Survey launch. “The road ahead is nonetheless full of challenges, notably indentifying domestic drivers of growth and implementing policies for sustainable improvements in the labour market. Joblessness is high and the share of long-term unemployment is among the highest in the OECD. More can be done to help the unemployed – and particularly the youth, the long-term jobless and the Roma – to find their way back to work,” he said.

The OECD identifies three priority areas for action.

Strengthen the fiscal framework. Spending ceilings should be introduced and adhered to as planned. Monitoring and evaluation of spending programmes should be strengthened, for which the recently established Fiscal Responsibility Board can play a useful role. The structure of taxation should be made less harmful to growth, notably by raising property and environmental taxes and lowering taxes on low wages. The efficiency of the tax system should be improved by combating tax evasion and unifying tax collection, as planned.

Reduce unemployment with stronger activation policies and better-targeted support. At 13.7%, Slovakia’s unemployment rate is the fifth highest in the OECD and includes a sizeable number of people out of work for more than one year. To combat this, effective labour market policies are needed, notably by increasing the efficiency and scale of the public employment service and investing in people’s skills.

Boost education outcomes and make the education system more inclusive. Efficiency could be improved by using already available school evaluations to raise the quality of teaching. More resources should also be allocated to teaching activities and the support of disadvantaged pupils, in particular for the development of pre-school education for Roma children. The acquisition of professional experience during studies should be promoted by developing work-based vocational training in order to improve the transition from school to work.